(Updates with Motorola query in 15th paragraph.)
July 13 (Bloomberg) -- U.S. investigators received permission in 2009 to wiretap 104 callers to two conference lines used by Primary Global Research LLC, a so-called expert networking firm, according to a court filing.
U.S. District Judge Kevin Duffy in Manhattan signed an order in October 2009 permitting investigators to listen in on the lines, which included Primary Global customers, employees and consultants, according the court filing submitted yesterday by James Fleishman, a former sales manager at the firm.
Fleishman, who is scheduled for trial on two counts of conspiracy next month, submitted the order and related papers in support of his motion to block the government from introducing evidence from the wiretaps.
Primary Global, based in Mountain View, California, is at the center of a nationwide probe of insider trading at hedge funds, technology companies, banks and consulting firms. Winifred Jiau, a former Primary Global consultant, was convicted of securities fraud and conspiracy June 20 in Manhattan federal court.
Fleishman’s motion papers were removed from the court’s electronic docketing system this afternoon. Ellen Davis, a spokeswoman for U.S. Attorney Preet Bharara, and a clerk in the chambers of U.S. District Judge Jed Rakoff, the judge overseeing the case, declined to comment on the removal. Fleishman’s lawyer, Ethan Balogh, had no immediate comment.
In an application filed by Assistant U.S. Attorney Reed Brodsky, prosecutors asked for authority to tap two phone numbers connected to AccuConference, a third-party communications company Primary Global used to set up conference calls between expert consultants and Primary Global clients, mostly hedge funds and mutual funds.
The wiretap application targeted particular identification numbers assigned to Primary Global employees and clients, which were used to access the phone sessions.
Fleishman argued that the wiretap request targeted at least 93 Primary Global clients not suspected of any crime and was therefore too broad. He also claimed the wiretaps weren’t necessary to the investigation and shouldn’t have been allowed.
The papers filed by the government, and attached to Fleishman’s motion papers, listed 15 people who, at the time, were considered targets of the investigation. The targets include Fleishman and seven people who have been charged and pleaded guilty in the case. Seven names appear to be redacted from the documents.
Federal Bureau of Investigation Agent James Hinkle, in an affidavit supporting the wiretap request, said that a person cooperating with the government recorded conversations with someone working as a consultant for Artis Capital, a San Francisco-based hedge fund.
According to Hinkle, the Artis Capital consultant “made statements reflecting that this consultant has provided and continues to provide material nonpublic information relating to public companies to Artis Capital.”
Hinkle said that the FBI was limited in its ability to investigate insider trading at Artis Capital after a lawyer for the firm learned of the contact between investigators and the consultant.
“We have the highest ethical standards and do not tolerate any illegal or inappropriate activity,” Michael Dimitruk, general counsel for Artis Capital Management, said in a statement. “We have not been accused of any wrongdoing.”
In his motion papers, Fleishman identified the cooperating witness as Karl Motey, an independent consultant who pleaded guilty to conspiracy and securities fraud last year. Fleishman’s court filing includes transcripts of phone calls and meetings that were recorded with Motey.
One transcript shows that FBI agents recorded a meeting Motey attended on Aug. 13, 2009, with Fleishman and Bob Nguyen, who was an analyst at Primary Global, at a restaurant. Nguyen pleaded guilty to conspiracy and fraud in January.
Motey asked Nguyen if he could “help him learn about merger and acquisition deals in advance of any public announcement,” the FBI said in an affidavit. “Nguyen said that they were working on one right now relating to Motorola” and that he would let Motey know as soon as they learned something.
“We’re definitely not a conventional company,” the transcript says Fleishman told Motey during the meeting.
The case is U.S. v. Fleishman, 11-CR-32, U.S. District Court, Southern District of New York (Manhattan).
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